Confessions of a money guru

One of the things that hasn't changed since my salad days is that I'm still a big saver. I got in the habit in my 20s of putting 15% to 20% of my income into retirement savings and other investments. I've still had plenty of money to do what I've wanted, including travel, learning to fly an airplane, taking two sabbaticals to care for my dying mom and contributing to charity. We've kept up the saving pace, even though we have other big expenses, like a mortgage and a child. It's not that tough once you're in the habit.

Confession No. 3: My husband's on a need-to-know basis

My artist husband is one of the smartest guys I've ever known, and he's a great life partner. We make all the big decisions together, including financial ones.

But in a decade of marriage I've never been able to get him interested in the details of our financial life. He has no clue which companies insure our property or our lives. He's not interested in how our money's invested. He doesn't remember our accountant's name.

I tell him all of these things, of course. Once in a while I make a big deal about updating him on our financial progress. He sits patiently through these presentations with a look on his face that closely resembles the one on mine when he begins to discuss Goya's struggles to gain academic placement in 18th-century Spain.

I haven't thrown in the towel, yet. But I have created "in case of emergency" documents that let him know whom to call, what to do and how to pay the bills should something happen to me.

Confession No. 4: I've changed, and I'm not the only one

When I started writing about personal finance full time in the mid-1990s, I was pretty hard-core about debt and bankruptcy. I figured those who got in trouble had only themselves to blame, and some of my fans at the time gleefully called me "the financial Dr. Laura."

Since then, I've interviewed hundreds of people who have filed for bankruptcy, as well as scores of bankruptcy attorneys, trustees and judges. I learned how often hard-working, responsible people get knocked for a loop by illness, accident, death, divorce and job loss. (Read "When staying alive means going bankrupt" for just one example.) Our nation's imploding health insurance system is implicated here; about half the bankruptcies filed include medical bills, and three-quarters of those with medical bills had insurance at the onset of their illness or accident.

Some of these cases hit close to home. I've referred a few friends to bankruptcy attorneys after reviewing their finances and realizing they faced unpayable debts.

In short, I discovered that what the bankruptcy experts had been saying all along was true. Instead of a "get out of jail free" pass for spendthrifts, bankruptcy was often a last, desperate option -- one many if not most people struggled for too long to avoid.

Financial institutions also have changed over the past decade. They've dramatically loosened their lending standards, allowing people to take on often-indefensible amounts of mortgage, auto and credit card debt. They've grown increasingly punitive, too, doubling and tripling the fees they charge. Banks have invented a nightmare called bounce protection, whose main purpose seems to be soaking the low- and moderate-income workers who haven't already fled to check cashers and payday-advance companies. (Payday-loan companies, all but unheard of in the 1990s, now have more outlets than McDonald's and Burger King combined.)

• Video: The cure for the middle-class crunch

I still believe our best defense against financial ruin is personal responsibility: avoiding credit card debt, having an emergency fund, trying to get and keep adequate insurance. But I no longer believe those defenses are unbreachable, and I have more sympathy for the folks who don't have the wherewithal to build them.

Confession No. 5: About those mutual funds . . .

After revealing my portfolio to Consumers Digest and confessing my sins again in the Get Rich Slowly post, I still hadn't done anything about those underperforming, over-managed funds. It was only when my editor suggested that I write this piece for MSN Money, with its umpteen million readers, that I was finally goaded into action. I sold off those poorly performing funds and redeployed the money into low-cost index funds.

Well, all except for a couple of UMB funds. You see, they've done really well, they're highly rated by Morningstar, and maybe, just maybe, they'll continue to outperform.

Nobody's perfect, right?

Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Aug. 23, 2007

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